* Includes the hospital and clinics in the Sioux Falls region ** Figures for Avera McKennan Hospital in Sioux Falls only *** Figures for Rapid City Regional Hospital only ^ This entity represents the holding company for Sanford's operations. The entire Sanford system has revenues of $2.6 billion ^^ Total CEO compensation can include base compensation, bonus and incentive compensation, other reportable compensation, compensation from related organizations, retirement and deferred compensation and nontaxable benefits.

By the numbers

$7.1 billion: Gross income in 2010 for South Dakota’s nonprofit industry. $4 billion: Income reported by the state’s 10 largest organizations.

25 fastest growing nonprofits

2010 Name

2007 Revenue

2010 Revenue

Change

SIOUX FALLS HUMANE SOCIETY

994,164

12,514,865

1158.8%

EVANGELICAL LUTHERAN GOOD SAMARITAN FOUNDATION

977,431

4,972,694

408.8%

HERITAGE ACRES I INC

614,315

2,634,883

328.9%

PERKINS COUNTY RURAL WATER SYSTEM INC

1,519,957

6,134,103

303.6%

BLACK HILLS AREA COMMUNITY FOUNDATION

581,490

2,303,460

296.1%

ALLEN CREDIT & DEBT COUNSELING AGENCY

600,040

1,950,219

225.0%

CHRISTIAN WORSHIP HOUR

551,258

1,695,077

207.5%

VERMILLION DEVELOPMENT COMPANY

559,759

1,688,265

201.6%

SOUTH DAKOTA RURAL ENTERPRISE INCORPORATED

626,531

1,856,843

196.4%

ABBOTT HOUSE INC

1,362,388

3,592,865

163.7%

FOUR BANDS COMMUNITY FUND INC

688,454

1,777,770

158.2%

FIRST NATIONS OWEESTA CORPORATION

1,291,513

3,318,791

157.0%

RAPID CITY CHRISTIAN EDUCATION ASSOCIATION INC

620,641

1,557,054

150.9%

WEST RIVER TRANSIT AUTHORITY INC

1,145,645

2,868,964

150.4%

RURAL AMERICA INITIATIVES

2,283,265

5,338,272

133.8%

INDIAN BOARD OF EDUCATION FOR THE PIERRE INDIAN SCHOOL

6,812,358

15,694,979

130.4%

FAULKTON AREA MEDICAL CENTER

2,988,221

6,830,387

128.6%

FEM ELECTRIC ASSOCIATION INC

4,698,017

10,288,494

119.0%

NEW HOPE UGANDA MINISTRIES INC

783,288

1,684,056

115.0%

WESTERN SOUTH DAKOTA COMMUNITY ACTION INC

1,908,416

4,096,362

114.6%

SACRED HEART RURAL HEALTH CLINICS INC

3,830,642

8,094,417

111.3%

CHILDRENS CARE FOUNDATION

2,191,948

4,496,556

105.1%

LOS CABOS CHILDRENS FOUNDATION

807,641

1,652,825

104.6%

BLACK HILLS EDUCATIONAL INSTITUTE INC

551,650

1,096,425

98.8%

REGIONAL HEALTH PHYSICIANS INC

23,099,675

41,631,574

80.2%

NOTE: Organizations with $500,000 or more revenue SOURCE: Internal Revenue Service form 990

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Three years ago, nervous finance officers bit their nails as investment markets continued a long and alarming collapse. As stock markets tanked in March 2009, White House economist Lawrence Summers announced that $7 trillion in U.S. stock market wealth had simply vanished.

That $7 trillion loss touched every facet of America. But for those in the precarious world of the nonprofit industry, where charitable donations from individuals are crucial, it was a time to batten down the hatches.

Some of the industry’s biggest players were worried. At The Evangelical Lutheran Good Samaritan Society based in Sioux Falls, which has annual revenues approaching $1 billion, belt-tightening measures were enacted as investment income dried up. Open positions were left open, travel was eliminated and projects put on hold.

The problem for Good Samaritan Society was its bond obligations, which require 90 days of cash in reserves and income to cover annual interest and principal payments. As the market dropped, Vice President of Finance Joe Herdina thought to himself: “This is not going to be good.”

“Cash was obviously getting close,” he said in an interview this month.

Luckily, the market started to pull out of its nosedive.

While much of the attention during the recession focused on for-profit companies and government budgets, the nonprofit industry still is coping with the fallout. The industry is a diverse jumble of groups that includes local community theaters, boys and girls clubs, mental health organizations and billion-dollar hospital systems.

Some weathered the financial downturn with minimal problems — in fact, many experienced healthy growth — and have gone on their merry way. Others burned through assets and face a challenging future. That’s especially true for those dependent on government contracts and grants.

“I think the reality is, there are a lot of dangers in the next year or two,” said Thomas Pollak, the program director for the Urban Institute’s National Center for Charitable Statistics.

(Page 2 of 5)

Despite the dangers, however, Pollak said it’s surprising overall how well the nation’s nonprofit industry is doing.

South Dakota’s nonprofit industry topped more than $7.1 billion in gross income, according to figures gleaned from tax filings with the IRS. That income, reported last year and reflecting 2010 numbers, was earned by 2,232 groups in the state. Thousands of other nonprofits either reported no income or were not required to file.

For comparison, the entire gross state product in 2010 — the total of all goods and services produced in South Dakota — was just under $40 billion, according to the Governor’s Office of Economic Development.

The revenue picture clearly is top heavy, however.

Three kings in Sioux Falls

Three nonprofits in Sioux Falls — Sanford Health, Avera McKennan and Good Samaritan — are among the city’s biggest employers.

More than half of that $7.1 billion was earned by the 10 largest organizations, which reported income of almost $4 billion. But even that figure is low. Sanford and Avera McKennan hospitals in Sioux Falls and Rapid City Regional Hospital are under the umbrella of regional health systems with facilities and ventures whose incomes are reported separately.

The larger institutions that rely on fees for service, particularly in vital services such as health care and energy, weathered the financial downturn. The assets for Good Samaritan increased by almost $200 million to $1.47 billion as the recession tapered off. The health systems — Avera, Sanford and Regional Health — also saw increases in asset valuations, according to IRS data.

East River Electric Power Cooperative in Madison, one of the largest nonprofits that isn’t in health care, saw its assets increase from $181.6 million in 2007 to $282.5 million at the close of 2010. Greg Hollister, the assistant general manager for administration, said the electric wholesaler saw positive sales growth throughout the financial crisis and recession. Hollister credits a strong agricultural market.

(Page 3 of 5)

At Sanford Health, life went on almost as if there were no recession. The health giant continued to expand, opening clinics in Aberdeen and Mitchell, building a new children’s hospital and offering new services, said Nate White, Sanford’s chief operating officer for the health services division in the Sioux Falls region. Officials also diversified investments before the financial collapse, White added, which helped the system create a stable environment in which there weren’t layoffs and employees continued to receive salary increases.

“We’re very proud of that,” White said.

That wasn’t the case everywhere. Avera and Regional Health both cut salaries for rank-and-file employees. And, according to IRS data, executives also took pay cuts.

“I do know that our leaders did take salary cuts during the recession,” said Daryl Thuringer, Avera’s vice president of marketing and public relations. “They asked everybody to. Our leadership took the deepest.”

Mary Masten, Rapid City Regional’s vice president of legal services, said there were people who decided to put off elective procedures because they were worried about their own job security. That had a drag on revenues.

Salary cuts at Rapid City Regional have since been restored, Chief Financial Officer Mark Thompson said.

“We feel that our employees helped us out through that period of time,” he said.

The big players, if they felt the recession at all, have shrugged it off and moved on. But other segments in the industry still feel its effects. Most organizations, said Pollack, who studies data on nonprofits, have absorbed the cuts.

Bob Sutton, president of the South Dakota Community Foundation, returned from a national meeting last week with his peers from other states. He came home thinking that South Dakota’s nonprofits were in better shape than others.

Like Hollister at East River Electric, Sutton credits a strong agricultural industry for insulating nonprofits during a tough economic period.

“The ag economy, during those very same years that the country was in a recession, the ag economy in South Dakota has been tremendously strong,” he said.

(Page 4 of 5)

That’s not to say there weren’t struggles. But many groups responded by focusing on their missions, Sutton said. Boards of directors, faced with tighter budgets, had to make sound business decisions. Out of the recession emerged groups that reinvented themselves, and Sutton said the industry is emerging stronger.

Nonprofits and their missions are varied. Many groups are focused on a single niche. But they occupy an important place in society, said Robert E. Wright, a professor of political economy at Augustana College.

“They are really crucial in many ways because they are fulfilling roles that would otherwise get picked up by the government,” he said. “While they’re not known for being the most efficient types of organizations, they’re better than the government because they face budget constraints.”

Relying on corporate, individual donations

John Grayson, executive director of the South Dakota Nonprofit Association, said most nonprofits operate on “the discretionary end of the monetary food chain.” That is, they rely on corporate and individual donations.

When the economy is in rough shape, those donations drop.

Many groups also rely on a specific grant or government contract, and they are vulnerable to cuts in government spending.

“That can be a very perilous place to be,” Grayson said.

Darcy Jensen knows all too well.

“That would be where we fall,” she said.

She’s the director of Prairie View Prevention Services in Sioux Falls, which receives funding from the nonprofit Dakota Drug and Alcohol Prevention. The nonprofit’s revenue dropped from from $830,036 in 2007 to $405,792 in 2010.

The group provides school-based services on alcohol and drug prevention and training on the dangers of methamphetamine. Or at least, it did. Federal and state money for meth awareness is gone. The group also has lost money from schools and the city of Sioux Falls.

So there’s no longer meth education services. Eight employees that provided the training are gone. So, too, is an employee who worked West River. Prairie View’s school-based drug and alcohol program has been reduced from 15 employees to nine, Jensen said. At one point, the group had a staff member assigned to each middle school. Now, that’s not possible.

(Page 5 of 5)

Thinking more like businesses

Grayson’s group counsels small nonprofits to diversify their revenue sources. They should think like businesses, offering services that come with fees besides relying on grants and donations. Late last year, the South Dakota Nonprofit Association started offering leadership training programs for those in and interested in the industry.

Jensen said she’s optimistic that new revenue sources can be found to make up the loss in government grants through churches and businesses that share her goal of drug and alcohol prevention.

In the meantime, said Carla Middlen, the president of Dakota Drug and Alcohol Prevention, “The people that really pay the price are the kids.”

The recession not only cut into the donations that some groups rely on, it increased pressures on those involved in relief and charity efforts. Matt Gassen, executive director of Feeding South Dakota, said food pantries in the state saw a 63 percent increase in client referrals from 2008 to 2011.

Still, Gassen said Feeding South Dakota did well during the bad days of economic calamity. From 2007 to 2010, revenues increased $4 million to $20.1 million, according to the IRS.

Gassen speculates that when times get really tough, donors direct their money to organizations that are situated to helping the poor and those down on their luck.

“I think they look at it and say, ‘Food, shelter and clothing,’ ” Gassen said. “Those are the basic necessities that keep people alive.”

While the fortunes of many nonprofits have improved since the stock market collapse three years ago, there are concerns on the horizon. Even for the biggest organizations.

Good Samaritan Society was helped during the downturn by the $840 billion stimulus that Congress passed three years ago. About a third of that money went to state and local governments, helping them to shore up their Medicaid programs, the federal/state program for the poor and an important revenue source for nursing homes.

South Dakota cut its reimbursements to Medicaid providers, and other states are struggling with their Medicaid budgets, Herdina said. Good Samaritan Society operates nursing homes in 24 states. Some are cutting. Illinois is taking six to eight months to pay its bills.

“The recession has a longer tail when it affects the Medicaid dollars,” Herdina said.

Medicare, the insurance program for seniors, also is in flux as politicians consider various options to deal with the burgeoning entitlement program. The decisions could have major implications for health care providers.

For now, at Sanford, it’s onward into the future. The system is pressing forward on building new facilities to take advantage of low interest rates.

But officials at Sanford and the other health systems admit they are flying blind because of what’s happening in the political world. And from them, you hear a complaint that’s bedeviling most, if not all businesses in the United States. It’s difficult to lay out long-term plans when so much can change by a vote in Congress.